Before the pandemic, Americans were as mobile as ever. In the prior decade, millions of Americans moved each year. Here’s a link for more information on moving in America.
Often, people wonder, “What happens to my estate plan if I move?” Well, it depends. If you move within the same state, your documents are valid and the planning will still be intact, as well. If you move from one state to another, your primary dispositive plan may still be valid, but some aspects might not work as well in your new state.
Let’s look at an example. John and Mary went to an attorney in State A. A couple of years later, they moved to State B. There are so many things to do when you move, they didn’t update their estate plan when they moved to the new state. This caused issues because the laws in State B were somewhat different. John had a stroke and when Mary went to use the Healthcare Power of Attorney, the hospital gave resistance because they’d never before seen a document like the one John and Mary had which was similar to that typically used in State A. The form used in State A didn’t have many of the choices the hospital staff in State B typically saw. Eventually, Mary was able to use the Power of Attorney, but the hospital’s resistance caused by not having a document familiar to them added stress when Mary was already near the breaking point. Later, after John died, Mary went to an attorney to settle things. The attorney opined that, while their estate plan made sense for State A, it didn’t do the tax planning which would have been wise to do in State B. You see, State B had a separate estate tax, while State A did not.
After John’s death, the bills from his final illness and funeral came in. Mary sold some stock to pay for the bills. When it came time to prepare her taxes for the year, her accountant asked her if the stocks had been community property before John died. When Mary told him they hadn’t been, he said “That’s a shame.” She’d owe tax on her gains. If the stocks had been community property at John’s death, even Mary’s part of the community property would have gotten a “step-up” in basis to fair market value. In other words, all the gain up until John’s death would have been wiped out.
If John and Mary had visited an estate planning attorney regarding their estate plan upon their move to the new state, they could have made plans more appropriate for the new state. This could have saved income tax on the stock sale after John’s death. Mary would not have encountered difficulty using the Power of Attorney. Mary could have saved money at her later death.
Whenever you have a significant life change, including a move to a different state, it’s best to check with an estate planning attorney to see if your estate plan should be updated or if you should make any other changes to take advantage of the laws of your new state of residence. That is the case whenever you move to a different state—even if it’s only across a river or state line.
Stephen C. Hartnett, J.D., LL.M.
Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128